Germany's Cabinet has approved a set of proposed pension changes on Wednesday that would link future benefits to wage levels, following months of negotiations, sources told dpa.
The proposed legislation would keep pension payments aligned with wage levels in the country, fixing minimum benefits at 48% of average wages, and also open the door to investing government funds in the stock market in the hope of helping to fund future pension increases.
The measure will now go to the lower house of Germany's parliament, the Bundestag, for consideration.
The plan calls for putting €200 billion ($217 billion) into a stock fund by the mid-2030s, with hopes that returns on the investments and interest income will help cushion anticipated increases in pension contributions from workers.
The pension system is expected to face financial strain as the large postwar "Baby Boomer" generation begins retiring from the workforce and drawing benefits.
The plan was put forward by Labour Minister Hubertus Heil, a Social Democrat (SPD), and Finance Minister Christian Lindner, a leader of the free-market liberal Free Democrats (FDP).
Germany's coalition government had previously spent months wrangling over the plans. The Finance Ministry blocked the bill as part of a larger dispute over the budget.